I like Facebook so much that I'd pay for it someday. I came to this conclusion mainly out of concern and the nagging persistence of facts. I've been dogged by the hackneyed, frequently asked question: how will Facebook (and social networks like it) make money? For all the pontificating and analysis, still, nobody has the answer.
The evidence suggests these early social advertising models will fail, and continue to fail — maybe not entirely — but at least against the expectations we've set for them. As a result, and this might be looked upon as blasphemy in the Web 2.0 community, we might have to pay eventually. New media could, ironically, become more like old media in the coming years.
There's been some things about this social advertising model (and ones like it proposed for the future) that seem unsustainable.
When I was at the Web 2.0 Summit more than a month ago, it was all I wanted to talk about, but many of the attendees there didn't. "They'll find a way" or "they're smart guys over there [at Facebook]" were common phrases. Others told me that advertisers saw good returns on putting an ad on top of Facebook.
But facts certainly don't share that sentiment. In this New York Times story, citing IDC research, we learned that "just 57 percent of all users of social networks clicked on an ad in the last year, and only 11 percent of those clicks led to a purchase, IDC said. And it turns out that marketers are not so interested in advertising on pages filled with personal trivia and relationship updates."
Many say Facebook has strong potential to monetize because it's more powerful from an advertising perspective to see what your friends buy (such as a scarf, to use one of the cited examples in Facebook CEO Mark Zuckerberg's 60 Minutes Interview last year), opposed to just searching for an item on Google and getting random text-based ads.
Call me an old Web 1.0 media hack, but I still bet on the stability of the latter delivery model over what Facebook wants to do.
There's a couple fundamental problems with this proposed social advertising model that keep getting ignored, or pushed aside, because they're inconvenient for social media evangelists and the third party application firms riding Facebook's coattails to explain. One (and this is channeling my inner-Obama) is the myth of the younger generation's apathy, in this case towards privacy. Because Facebook originated in college, and garnered that group as its core constituency before blossoming into what it is today, social media enthusiasts and marketers assume this generation's propensity to share anything and everything is unwavering. What an amazing paradigm shift! they exclaimed. Imagine them just broadcasting their buying habits for you!
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.